Rakon seeks to buy out Indian joint venture manufacturing partner for US$5.5 mln

Tuesday 27th February 2018

Rakon is seeking to buy out its senior partner in an Indian joint venture for US$5.5 million, giving it control of what it says is a core part of the component maker's manufacturing strategy.

Auckland-based Rakon is in "advanced discussions" with Centum Electronics to buy its 51 percent stake in Centum Rakon India Private Ltd, a joint venture set up in 2008 pooling the firms' respective expertise in frequency control products. Rakon shifted manufacturing to India in 2012 in an effort to cut costs, although it booked a $3.2 million impairment charge on the Centum joint venture last year, valuing it at $3.7 million as at March 31, 2017.

"Both parties' management are continuing to pursue the proposed transaction and have signed a non-binding terms sheet in which Rakon would buy a consideration of US$5.5 million (staged over 18 months) for the 51 percent shareholding," managing director Brent Robinson said in a statement. "Management are continuing to work on finalising a number of matters including due diligence, approvals and the terms of final agreements."

Rakon turned to a first-half profit in the six months ended Sept. 30 noting growth in its key technology markets, which helped improve margins and reduce costs.

The company said the proposed deal to buy out its Indian partner is subject to "satisfactory conclusions of discussions" and various approvals, and has no deadline to be completed.

The shares last traded at 20 cents and have dropped 13 percent so far this year.

(BusinessDesk)

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